Florida Insurer's Chief Resigns

Suit Accuses Citizens Head Of Bribery

September 16, 2005|By Kathy Bushouse Business Writer and Staff Researcher Barbara Hijek contributed to this report.

A top executive at Citizens Property Insurance Corp., brought in last year to clean up the state-backed insurer's handling of claims, abruptly resigned amid bribery accusations leveled in a lawsuit and now faces a criminal investigation.

R. Paul Hulsebusch left his position as chief operating officer of the state's second-largest home insurer on Sept. 9, two days after an attorney said he presented a Citizens' representative with material outlining how Hulsebusch took bribes and extorted from a Texas claims-adjusting company in exchange for contracts.

This marks another potentially embarrassing turn for Citizens, roundly criticized last year for its poor response to a crush of hurricane claims in 2004. Hulsebusch was hired in October as a consultant to overhaul Citizens' claims process. In February, he was named Citizens' chief operating officer.

Citizens hired a forensic accounting firm and an independent law firm to investigate and will cooperate with the state investigation, company spokesman Justin Glover said. Citizens will make its findings public once the investigation is finished.

At this point, Citizens has "no reason to believe any policyholders were adversely affected" by the allegations, Glover said.

He confirmed Hulsebusch's resignation but would not say whether Hulsebusch was forced to resign or if the resignation was related to the bribery allegations.

Hulsebusch, 39, could not be reached for comment Thursday. A woman who answered the telephone at his home in Pennsylvania said Hulsebusch was not available.

The allegations stem from a Texas lawsuit filed in the spring against Citizens, Hulsebusch and a rival adjusting firm by Universal Risk Insurance Services, a Houston claims adjusting firm. The lawsuit was amended Wednesday to include the bribery allegations, said attorney Scott Rothenberg, who is representing Universal Risk.

Universal Risk initially sued Citizens because the firm thought it was being targeted as a scapegoat because of delays in processing claims from last year's hurricanes, Rothenberg said.

The lawsuit states that Citizens asked Universal Risk to send adjusters to Florida, but a dispute arose over the rate Citizens would pay for the company's services. Universal Risk says in the suit that it was not paid.

Then, according to the lawsuit, Citizens brought in a competing Texas-based firm to handle storm claims and agreed to deflect blame onto Universal Risk for poor claims handling, the lawsuit alleges.

Officials from that company, Quantum Claim Service, could not be reached for comment, nor could the attorney representing the company in the case.

Once Rothenberg said he started investigating, "the incidents of bribery ... became known to us."

The complaint alleges that "tens of thousands of dollars in goods and merchandise" were provided to Hulsebusch in exchange for adjusting work from Citizens.

Universal Risk is seeking at least $3.6 million in damages, which includes work the company did for Citizens but was not paid for, as well as lost future profits, Rothenberg said.

The allegations will be investigated separately by fraud investigators from the Department of Financial Services, and by investigators from the Office of Insurance Regulation. State officials found out about the bribery and extortion allegations on Wednesday night and started their investigation Thursday, said Tami Torres, a spokeswoman for the Department of Financial Services.

State Chief Financial Officer Tom Gallagher, who oversees the Department of Financial Services and lobbied for Citizens' creation, was "frustrated and concerned" by the extortion allegations, Torres said.

In a written statement, Gallagher said the latest developments for Citizens are "especially troubling because Floridians' claims may have been mishandled as a result. We will pursue this investigation fully to ensure complete accountability for Florida's consumers."

Citizens was created by the Legislature in 2002 as an insurer of last resort, combining two previous state insurance entities. South Florida is its biggest market, with more than 396,000 policies in Broward, Miami-Dade and Palm Beach counties.

Last year's hurricanes resulted in a $516 million deficit for Citizens, which is making up for its losses through a 6.8 percent assessment on all Florida's home insurance policyholders. For someone with a $2,000 annual premium, that's an additional one-time charge of $136 tacked onto an insurance bill.

Some state legislators said Thursday they were shocked by the revelations about Citizens and vowed to take action.

Sen. Ron Klein, D-Boca Raton, said the news gave further support to the need for an audit of Citizens' operations, which he requested earlier this year. The review by Florida's auditor general should be completed in February.

"To me this is another example of the failure of Citizens," Klein said. "Certainly there is a lack of confidence that the public has in it, and these types of situations justify that lack of confidence."

Sen. Rudy Garcia of Hialeah, the Republican chairman of the Senate Banking and Insurance Committee, said he will make overhauling Citizens his priority. "I hope that this is an isolated situation and that it does not represent the rest of the folks that work at Citizens."

Staff Researcher Barbara Hijek contributed to this report.

Kathy Bushouse can be reached at kbushouse@sun-sentinel.com or 954-356-4667.